Skip to main content

View Diary: NYT: It's Krugman Vs. Reinhart & Rogoff, Who Trivialize Their Incompetence And Attack “Left” (246 comments)

Comment Preferences

  •  She's saying "skip the borrowing part" (13+ / 0-)

    just issue, as a sovereign nation, what you need. (She doesn't say, but implicit in the notion, is that you can issue or withdraw currency depending on what circumstances require.)

    What is the debt then? Zero.


    Actual Democrats is the surest, quickest. route to More Democrats

    by Jim P on Fri Apr 26, 2013 at 08:30:48 AM PDT

    [ Parent ]

    •  Interesting concept (4+ / 0-)

      Wheahter spending thru bond sales or printing more money any inflationary effect might be the same at the end of the day?

      .................expect us......................... FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

      by Roger Fox on Fri Apr 26, 2013 at 08:32:59 AM PDT

      [ Parent ]

      •  And inflation gets too high, people yell at (8+ / 0-)

        their Congress, and the currency gets withdrawn, and inflation goes down.

        Don't have the exact figure handy, but since we handed over issuance to the Fed in 1913, inflation has been something on the order of 2,100%. And nobody gets to pressure the Fed.

        iirc, the Populists of the 1890s wanted a State Bank which would issue loans at low, and non-compounding, interest. To cover the bad loans. So there's another route to getting the currency into circulation.


        Actual Democrats is the surest, quickest. route to More Democrats

        by Jim P on Fri Apr 26, 2013 at 08:55:27 AM PDT

        [ Parent ]

      •  Bond sales could be more inflationary... (1+ / 0-)
        Recommended by:
        Bluesee

        All other things being equal.  First, they pay interest.  Second, they get leveraged big time.

        Both bonds and currency are issued by the federal government.  There are two differences.
        1) Bonds pay interest from the government currency does not.
        2) You can pay your taxes directly with currency.  The government does not accept bonds directly for as payment of taxes.

    •  A Good Movie (0+ / 0-)

      "The Secret of Oz".  It lays out some very fundamental (one might say radical) ideas, and asks 'why not'.

    •  So (0+ / 0-)

      the hannah's claim is that deficits should always be financed by printing money and never by issuing bonds? That's a pretty astounding claim. Besides hannah's say-so, is there any evidence for this claim?

      •  No. There ARE no deficits to finance. (6+ / 0-)

        The currency is printed as per what is authorized to spend, end of story.

        If the authorizations prove to be inflationary to spend, then the politicians either have to justify the expense or cut back. There wouldn't be any "lets spend a trillion on a world-wide war machine and go to Bankers to fund it." There'd be, "well we can't afford this world-wide war machine because the people won't pay for it because it's bankrupting them."

        The Bank of Australia did this, and had a fine economy for decades, until they moved currency-creation into Banker's hands about 20 years ago. Now they're fucked like the rest of the world.

        North Dakota has had a State Bank for over a century, and routinely shows a profit; while North Dakota itself does not gather debt to service.

        There have been periods in US history where we did this, and things were fine until we moved back to private Central Banks. Inflation between the nation's founding ran at a little over 1%. Since the Fed's founding in 1913, over 2000%. Why? Interest on debt.

        There are other instances, actual historical instances, and they've all worked. Don't have time to find them for you now.

        Apart from that you just need to think it through in my opinion. 1/3 or so of today's deficit is purely service on debt.


        Actual Democrats is the surest, quickest. route to More Democrats

        by Jim P on Fri Apr 26, 2013 at 11:46:30 AM PDT

        [ Parent ]

        •  If a government (0+ / 0-)

          spends more than it collects in in tax revenues in a year, that difference is a deficit. Printing money to make up that difference is financing that deficit by issuing money. If you and hannah want to change the meaning of terms so that "deficits" no longer means what it means to everyone else, that's your prerogative.

          Does the government even need to collect taxes in your theory? Is this your version of MMT, or are you describing some other economic theory?

          •  A Law's passing, by it's very existence, is (0+ / 0-)

            the command to make currency available. The moment the Executive signs a Bill into Law, the only delay is in the Executive's Treasury, um, executing the Law.

            Whether the currency is from that amount collected in taxes and other revenues, or that part which needs to be newly issued, there is no deficit. Except maybe a transient one for the time it takes the Law to be signed and the Treasurer to get her Office to actually print what's required.

            Erase "deficit" in this model. It doesn't exist in any meaningful way, beyond the time needed to print. There's no Bonds to sell to Bankers so as to finance the Laws.

            Although you can meaningfully speak about a "shortfall" you can no longer meaningfully speak about "deficit." And you're playing a whole other ball game with "shortfall" than you are with "deficit." You're having entirely different political conversations, and actions. You've cut the Bankers out of the loop, and instead Congress is forced to take responsibility for their actions, whether inflationary or not sufficient to counter down times.

            There's no eternally-increasing interest charges affect the national budget. Gone.

            You replace Banker's magic with Government magic, except there's no interest charges.

            I don't know that Hannah and I share the same understanding of the idea, but it's not so much a theory as 2 + 2 = 4. And it's an idea which long long precedes any economic theory of the last 100+ years.


            Actual Democrats is the surest, quickest. route to More Democrats

            by Jim P on Sat Apr 27, 2013 at 10:34:13 AM PDT

            [ Parent ]

      •  Hannah is not claiming anything. (4+ / 0-)
        Recommended by:
        hannah, Bluesee, dadoodaman, TheMomCat

        She's expressing an example using Modern Money Theory (also known as chartalism).  MMT has many proponents including James K. Galbraith.

        I'm no economist, just a humble biz grad, but MMT makes perfect sense to me. It explains how economies work when you have governments such as ours that issue fiat currencies as opposed to currencies dependent on the amount of a commodity, such as gold or silver, for which it can be redeemed.  The US government has been issuing fiat currency since Richard Nixon, but we have yet to change our central banking system to correspond.

        "Some folks rob you with a six-gun, some rob you with a fountain pen." - Woody Guthrie

        by Involuntary Exile on Fri Apr 26, 2013 at 12:10:32 PM PDT

        [ Parent ]

        •  MMT (1+ / 0-)
          Recommended by:
          Bluesee

          accepts that countries will run deficits, issue bonds, etc. See here. What is being expressed here is something completely different. Apparently, hannah and Jim P believe there is an obligation for governments to finance their spending above what they take in from tax revenues only by issuing new currency. The proponents of MMT make no such claim. It is one thing to say that a nation that uses fiat currency can never be insolvent because it can always issue more money. It is quite another to say that that same nation should never run a budget deficit because it should always issue more money to finance its expenditures (above what it takes in from tax revenues).  

Subscribe or Donate to support Daily Kos.

Click here for the mobile view of the site